More Stories

Informist, Monday, Jul. 13, 2026

 

NEW DELHI – The Supreme Court on Monday upheld the government's computation of the average sale value of iron ore by including payments made towards royalty, the District Mineral Foundation and the National Mineral Exploration Trust, thereby saving the state governments from an estimated loss of INR 3 trillion.

 

The government's rules for the inclusion of the District Mineral Foundation and the National Mineral Exploration Trust in the sale value for computing the average sale price are constitutional and valid, the court said, adding that these are not violative of Article 14 and Article 19(1)(g) of the Constitution. 

 

The government had argued that if the provisions were struck down, the estimated loss to the states from reduced revenue would run into trillions, and there would be a commensurate benefit to existing leaseholders. Thus, the total loss to the state governments if both the production and prices remain at the 2023-24 (Apr-Mar) level would be more than INR 3 trillion, it had said. Further, this loss is only for mineral iron ore, and if other minerals are also taken into consideration, then the loss would increase further, it had said.

 

The government's rules on the calculation of average sale value do not violate Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957, the apex court said. The levy measure is intended to ensure that the loss of revenue is offset, the court said. Such loss of revenue occurs due to price manipulation, it said. When a levy measure is prescribed to check evasion, individual hardships cannot be determinative, the court said. A Constitutional Court called upon to pronounce on the validity of such fiscal measures should be loath to interfere, for any interference in the absence of legitimate grounds would put public interest in jeopardy, it said.  

 

Section 9 of the Mines and Minerals Act governs royalty payments on major minerals extracted in India. It mandates that every mining leaseholder must pay a royalty to the respective state government for any minerals removed or consumed from the leased area.

 

The top court rejected a petition by Kirloskar Ferrous Industries Ltd. and other parties challenging the validity of explanations to Rule 38 of the Minerals (Other than Atomic and Hydro Carbon Energy Minerals) Concession Rules, 2016 and Rule 45(8)(a) of the Mineral Conservation and Development Rules, 2017. Kirloskar Ferrous was engaged in the extraction of pig iron and the manufacture and sale of its byproducts under a mining lease for iron ore in Karnataka. The petitioner had said that after explanations to Rule 38 and Rule 45((8)(a) were added, royalty, which had already been paid in the previous month, was again being factored for the purposes of computation of royalty to be paid for the subsequent months in case of iron ore minerals. Thus, this "compounding" of royalty by virtue of the explanations was "manifestly arbitrary" inasmuch as it has led to a cascading effect within the fold of determination of the rate of royalty under the 1957 Act, it said. 

 

The petitioner had said that, in computing royalty in respect of coal, the government had remedied the anomaly by excluding the previously paid royalty and contributions to the District Mineral Foundation and the National Mineral Exploration Trust from its calculation, by way of an amendment. However, the same was not the case with iron ore minerals. The petitioners said that, for the purposes of computing royalty, there was no intelligible differentia between coal and iron ore, and thus the exclusion of royalty and other contributions from the computation of the sale value of coal but not of other minerals, such as iron, was manifestly arbitrary.  

 

The apex court said that the comparison with coal is completely unjustified, as there is no concept of average sale price in coal. Hence, comparing coal and iron ore, in this context, is akin to comparing apples and oranges, which the court is not prepared to do, it said. The apex court agreed with the government's justification that, unlike for coal, where the notified prices, auction prices of Coal India Ltd. and Singareni Collieries Co. Ltd., or the import price form the basis of the National Coal Index, there is no such mechanism for iron ore. 

 

On Monday, shares of Kirloskar Ferrous Industries ended 1.0% higher at INR 472.55 on the National Stock Exchange.  End

 

Reported by Surya Tripathi

Edited by Saji George Titus

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.